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Take that foreclosure notice seriously

By: 15 October 2010 13 Comments

Unless you’ve been completely out of contact with the various media outlets throughout the United States, you’ve heard that attorneys general in all 50 states and banking regulators in 30 states launched an investigation into foreclosure practices.

Click the aforementioned link for more details, but the long and short of it is this — there are some serious questions about the adequacy of paperwork filed in foreclosure actions around the nation. There have been questions in some extreme case over the ability to bring a legitimate foreclosure action at all due to some flaws in the transference of loan originators to loan servicers. When you consider the investigation will look into both current and past foreclosures, the potential impact of the probe could be massive, indeed.

Will some foreclosures simply be tossed out of court? How many homeowners could be impacted by the investigation? Those answers — and more — are forthcoming, but Arkansas Deputy Attorney General Jim DePriest said one thing is certain — the massive investigation will take a long time to complete.

DePriest said at least one other thing is certain — while there are questions about the legitimacy of some foreclosure actions, perhaps the worst thing a consumer can do is take no action when served with a foreclosure notice.

“Absolutely take those seriously,” he said in a phone interview with First Arkansas News.

While some foreclosure actions may be in doubt, DePriest said many of them are perfectly legitimate. For one thing, there are essentially two types of loan originators in the United States — those that keep their mortgages in-house and those who transfer them to larger servicers such as Bank of America and Wells Fargo.

Here’s how that works. Let’s say a buyer goes to Arvest Mortgage — an Arkansas company that handles everything from originating mortgages to servicing them. DePriest said banks such as Arvest that keep their loans “in-house” have far fewer problems when it comes to filing the adequate paperwork to foreclose on a property.

He said one focus of the investigation has to do with those loans that have been transferred from the original lender to a servicer. Over the past 20 years, that process has become more popular, meaning a lender might take out a mortgage with one institution and discover that a completely different company has purchased the mortgage and is collecting payments on it, thus assuming the role of the mortgage servicer.

Questions have been raised about the proper documents being filed throughout that transfer process, meaning the servicer might — in some cases — not have standing to file suit. Additionally, have been questions raised about the adequacy of documents filed in the overall foreclosure process.

Another matter for concern has to do with the requirement that servicers are obliged to give borrowers a chance to work out a plan to bring their mortgages current after a default. DePriest said a bank must attempt to work out such a plan before it can accelerate the loan and demand that the loan be paid in full to avoid foreclosure.

DePriest said his office has received word that some debtors have not been offered the chance to take care of mortgages that are in default. If those claims are true, then there are substantial questions about whether the servicer can start a foreclosure action.

Another matter to consider is that most foreclosures in Arkansas are non-judicial. Judicial foreclosures, as the name implies, start and end in the courts system. Non-judicial foreclosures, however, are kept outside the courts unless the borrower files an action asking a court to settle the case. In other words, the borrower who receives a notice of a non-judicial foreclosure must take action to fight it in court — if that action isn’t taken, the matter will likely result in a win for the servicer.

In the end, then, borrowers do have rights in foreclosure proceedings. They must take action to defend those rights, however. The borrower who disregards a foreclosure notice could be headed for trouble regardless of the result of the investigation started by the nation’s attorneys general.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

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